Is AHITX a Strong Bond Fund Right Now?

High Yield - Bonds fund seekers should consider taking a look at American Funds High Income Trust A (AHITX). AHITX has a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

AHITX is part of the High Yield - Bonds section, which is a segment that boasts many possible options. Often referred to as "junk" bonds,High Yield - Bonds funds sit below investment grade, meaning they are at a high default risk compared to their investment grade peers. However, one advantage to junk bonds is that they generally pay out higher yields while posing similar interest rate risks to their investment grade counterparts.

History of Fund/Manager

AHITX is a part of the American Funds family of funds, a company based out of Los Angeles, CA. The American Funds High Income Trust A made its debut in February of 1988 and AHITX has managed to accumulate roughly $11.19 billion in assets, as of the most recently available information. A team of investment professionals is the fund's current manager.

Performance

Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 5.68%, and it sits in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 9.35%, which places it in the top third during this time-frame.

It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. The standard deviation of AHITX over the past three years is 4.67% compared to the category average of 11.2%. Looking at the past 5 years, the fund's standard deviation is 6.43% compared to the category average of 12.81%. This makes the fund less volatile than its peers over the past half-decade.

Bond Duration

Modified duration is a measure of a given bond's interest rate sensitivity, and is a metric that's a good way to judge how fixed income securities will respond in a shifting rate environment.

For those that believe interest rates will rise, this is an important factor to consider. AHITX has a modified duration of 2.8, which suggests that the fund will decline 2.8% for every hundred-basis-point increase in interest rates.

Income

We must remember to consider the fund's average coupon, as income is traditionally a big reason for purchasing a fixed income security. This metric takes a look at the average payout by the fund in a given year. For example, this fund's average coupon of 5.9% means that a $10,000 investment should result in a yearly payout of $590.

If you are looking for a strong level of current income, a higher coupon is a good choice, though it could pose a reinvestment risk; these risks can occur if rates are lower in the future when compared to the initial purchase date of the bond. Since income is just one part of the bond picture, investors need to consider risk relative to broad benchmarks.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, AHITX is a load fund. It has an expense ratio of 0.72% compared to the category average of 0.94%. So, AHITX is actually cheaper than its peers from a cost perspective.

While the minimum initial investment for the product is $250, investors should also note that each subsequent investment needs to be at least $50.

Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.

Bottom Line

Overall, American Funds High Income Trust A ( AHITX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, better downside risk, and lower fees, American Funds High Income Trust A ( AHITX ) looks like a good potential choice for investors right now.

Want even more information about AHITX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.

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